The pound dropped as a report confirmed that U.K. services contracted last month, adding to speculation the Bank of England will ease policy to head off an economic slowdown.

Sterling pared Tuesdayâ��s gain versus the dollar which was the biggest in three weeks. Markit Economics said its Purchasing Managers Index slid to 47.4 in July from 52.3 in June, below the 50 level that signals contraction. The gauge hasnâ��t been this weak since March 2009, when the BOE cut its benchmark interest rate to a record-low 0.5 percent and introduced quantitative easing to aid the economy.

The BOE will announce its latest policy decision Thursday, with all but two of 52 economists in a separate Bloomberg survey predicting the central bank will cut interest rates for the first time since March 2009.

The pound fell 0.2 percent to $1.3335 as of 9:33 a.m. in London, having climbed 1.4 percent on Tuesday, the biggest gain since July 14. Itâ��s still up from a 31-year low of $1.2798 reached on July 6. Sterling was little changed at 83.99 pence per euro.